Stock markets were plunging as the March rally that has sent equities surging for most of the month ground to a halt amid worries that General Motors and Chrysler may be forced into bankruptcy.
The U.S. government has told the two companies that the plans they've submitted are not acceptable to receive more federal bailout money, forcing out GM CEO Rick Wagoner and giving Chrysler a 30-day window to complete a proposed partnership with Italian automaker Fiat.
The S&P/TSX Composite Index fell 280.20 points Monday to 8,540.86. Today’s decline in the S&P/TSX trimmed its advance since March 9 to 12%.
Royal Bank of Canada, the country’s largest bank by assets, slid 4.9% to $35.17. Toronto-Dominion fell 5.3% to $41.52. Manulife lost 11% to $13.37.
Among oil stocks, Suncor slumped 6.1% to $27.58. EnCana fell 3.9% to $49.96. Abu Dhabi National Energy Co., the Persian Gulf petroleum and power producer known as Taqa, is hunting for acquisitions in Canada’s tar sands, home of the world’s second-largest crude deposits outside Saudi Arabia, according to two people involved in the search.
Research In Motion lost 3.7% to $53.74. Efforts to attract more buyers through advertising and improved devices have eaten into the company’s gross profit margins, which have fallen to 40% from about 50% in the past six months, the Wall Street Journal said.
FNX Mining Company Inc. sank 17%, the most in the S&P/TSX, to $4.02. The copper and nickel explorer reported a fourth-quarter loss of 49 cents a share, worse than the average analyst estimate from a Bloomberg survey.
Magna International Inc., North America’s largest auto- parts maker, tumbled 5.4% to $32.99. The Obama administration ousted General Motors Corp. Chief Executive Officer Rick Wagoner and ordered GM and Chrysler LLC to overhaul their recovery plans if they are to get further taxpayer aid. Bankruptcy may be the best option for the automakers, an administration official said.
The deepening global recession requires the use of "everything necessary" to spark growth, Prime Minister Stephen Harper said in an interview from Washington.
The recession is deepening and outweighs concerns that steps taken now could fuel inflation, Harper said. He didn’t rule out additional fiscal stimulus, indicated global leaders are near consensus on rules for financial markets and said he’s in close contact with President Barack Obama’s administration on help for the automotive industry.
Canada’s economy shrank at a 3.4% annual pace in the fourth quarter, the fastest since 1991, and reports have shown record job losses and trade deficits in recent months
The Canadian dollar was off 1.42 cents to 79.28 cents U.S.
ON BAYSTREET
Of the 13 TSX subgroups, all but one were negative. Metals and mining stocks were down 8.9%, financials were off 5.7%, while energy stocks dove 4.4%.
Gold was the lone positive group, up 0.7%
The TSX Venture Exchange gave back 15.82 points to 945.20 while the Nasdaq Canada Index dipped 18.56 points to 445.81
ON WALLSTREET
The Dow Jones Industrials average tanked 254.16 points Monday to 7,522.02.
The S&P 500 index lost 28.41 points to 787.53, while the Nasdaq subsided 42.43 points to 1,493.14.
The blue-chip index had surged 20% since hitting 1997 lows on March 9.
Over the weekend, the U.S. government gave GM 60 days worth of financing to restructure, while Chrysler gets up to $6 billion U.S. Speaking Monday, President Obama said both companies need a fresh start to put their restructuring plans into play.
"That may mean using our bankruptcy code as a mechanism to help them restructure quickly and emerge stronger," he said.
GM said it has a strong preference to completing restructuring out of bankruptcy, Reuters reported. But worries that one of the two might have to declare bankruptcy dragged on the auto sector and broader market.
GM shares fell 25%, Ford Motor lost 2.8%, Toyota Motor lost 3%.
Banks were also big losers. Citigroup, Bank of America, Wells Fargo and JPMorgan Chase were among the decliners.
In other news, Fifth Third Bancorp said Monday that it was selling 51% of its payments processing business to global buyout firm Advent International for $561 million U.S.
Treasury prices rallied, lowering the yield on the benchmark 10-year note to 2.69% from 2.76% Friday. Treasury prices and yields move in opposite directions.
Oil prices declined $3.97, or 7.6%, to $48.41 U.S. a barrel on the New York Mercantile Exchange.
COMEX gold for June delivery rose $2.90 to $928.20 U.S. an ounce.
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